World’s 10 expensive city districts for renting office space

Hong Kong is the city with the world’s highest rent for a premium office, with London and New York in second and third place respectively, according to JLL’s latest Global Premium Office Rent Tracker.

Hong Kong takes a significant lead in terms of occupancy costs compared to the two other global cities. The price of premium office space – defined as those in Class A buildings with excellent facilities – in Hong Kong’s Central district is more than 50 percent higher than rates in London and New York. It costs US$302 per square foot per year to rent space in a top-notch building in Hong Kong alongside US$197 per square foot in London’s West End and S$194 per square foot in Midtown New York.

This is also a new high for Hong Kong compared to US$262 a year ago. Prices were pushed up due to strong demand and shortage of stock as companies from Mainland China look to have a base in Hong Kong.

“Hong Kong’s Central district is being reshaped as western banks and financial institutions downsize or move out due to global challenges such as slower economic growth and increased compliance and regulations,” says Megan Walters, head of research, Asia Pacific, JLL. “Mainland Chinese wealth and asset companies are moving in as they seek to boost their presence in Hong Kong. This demand is expected to continue with the launch of the Shenzhen-Hong Kong Stock Connect program in December. The market is also set to get more fragmented since the initial requirement from these companies is usually less than 5,000 square feet. This could prove challenging for both tenants and landlords for the long term.”

Both Beijing and Shanghai fell a place to fourth and sixth position respectively. Tokyo leapfrogged past Shanghai to take fifth spot, propelled by high leasing activity and big-ticket pre-commitments, while New York has seen premium rents increase by more than 10 percent in 2016. Singapore takes 18th spot in the rankings after a rental correction with more office space supply in the city-state.

“The world’s most important and interconnected cities dominate the top spots in the rankings,” says Walters. “There is a clear demand for them as seen in how vacancy rates are less than 2 percent in three out of these six gateway cities, specifically Hong Kong, Beijing and Tokyo. And Singapore’s relatively lower rent gives it a competitive advantage over these costlier Asian gateway cities.”

About the JLL Global Premium Office Rent Tracker

In this second edition, the report compares like-for-like occupation costs across 35 major markets in 31 cities of differing function and evolution, ranging from Established World Cities (such as New York, London and Tokyo) through to Emerging World Cities (like Mexico City Moscow and Mumbai) and New World Cities (as typified by San Francisco, Sydney and Toronto). The Tracker includes the key elements of occupancy costs – net effective rent, service charges and property tax – all standardised to enable international comparisons.